Sometime in late 2012, I learned about a new system of transferring value via the Internet. It was a peer-to-peer distributed system, analogous to BitTorrent, a system for transferring files. I had no idea that this would be a way to generate income and support sustainable community development, which would soon become my life’s work, but I was so fascinated by this new concept, I immediately converted a little bit of that week’s paycheck to “Bitcoins.”
Years later, some people are surprised that I am still involved and still promoting it as a path to sustainability and a better planet. They read their mainstream media articles and ironically ask: “Isn’t it controlled by the NSA?” “Isn’t it the Bilderberg’s method of forcing us all to accept a cashless society?” “Won’t it use more electricity than the entire world in 2020?” “Isn’t Satoshi Nakamoto really a CIA operative?” “How could you be planting fruit trees in the tropics yet still be participating in this capitalist system of transferring value that is surely controlled by the CIA, the NSA, the Russians, and every government and nongovernment conspiracy group in existence?”
Breaking Down Cryptocurrencies: Bitcoin to IOTA and Beyond
Well, let’s start at square one. Bitcoin, Litecoin, Ethereum, Dash, IOTA and about 1,300 others are names given to open-source, peer-to-peer, distributed ledger systems. They are multiple-entry accounting ledgers, distributed across millions of computers globally. They are made secure by the constant confirmation of the other computers on the network. They are kept honest by the open-source code that is reviewed and tested by thousands of volunteer and paid programmers.
This technology was primarily developed for transferring value, but it has many other uses as well. It can register land titles on a secure and immutable blockchain. It can transfer shares in companies and organizations. It can manage Internet voting, micro-credit systems (such as on Reddit) and much more. Even more important are the societal implications. Poor people in “unbanked” areas (such as most of Africa) can access cheap and fast money transfer systems via SMS on a $20 cell phone. The unbanked can become their own bank, cutting out the middleman. Rich central bankers can’t simply steal money from the middle and lower class just by pressing the “print” button. Whistleblowers and defectors from abusive corporations and corrupt government agencies can sign messages and receive payments anonymously (using privacy-oriented currencies such as Monero, Dash and PIVX) without risking their lives. You can send millions of dollars across the globe in minutes for just a few cents without waiting days for the legacy banking system to get its act together (and paying upward of $80 in the wire system).
And as for the criticisms—and there are many—I say, it’s a free market! Are you worried the NSA controls Bitcoin? You have 1,300 other choices. Are Bitcoin transactions too expensive? Try Litecoin. Are Ethereum transactions too slow? Try NEM. Do you think a currency should be inflationary to prevent hoarding? Use PIVX. Is Bitcoin not anonymous enough for you to pay for a VPN service in China? Use Verge or Dash. Worried that the blockchain will get hacked by a quantum computer, if those ever get invented? Use IOTA or QRL (Quantum Resistant Ledger.) Power consumption concerns? Plenty of cryptocurrencies have a lower power consumption and are way more efficient than Bitcoin. Again, you have 1,300 choices and counting.
Cryptocurrencies: No Centralized Control
I am still participating because the concept of a distributed ledger has no political philosophy, no economic system and no centralized control. If I give you a case of bananas and you trade me two cases of bananas a week later, and I write in a notebook that there was a trade deficit and that I owe you 18 dollars, and you sign it, we have a pretty secure record, provided we both trust each other not to change the ledger. What if I write that I owe you 230 zingzangs? That would work, too, as long as we both agree that 230 zingzangs is worth a case of bananas. And it would sure help if other people recognize that the zingzang ledger and value transfer system is secure and are willing to sell a case of bananas for 230 zingzangs. Of course, they wouldn’t be so keen to trust the zingzang ledger if it was just a notebook held by one person and the value transfer system required a pen and the physical presence of both parties. But throw that ledger onto millions of computers, secure it with the strongest cryptography in existence, and add a thriving market of vendors and exchanges who accept that currency unit, and you have a cryptocurrency—with more “intrinsic value” than the dollar and euro could ever hope for.
Many people ask me if I think Bitcoin will continue to be successful or if other cryptocurrencies will take its place. Some insist that only one cryptocurrency will become the “favorite” and all others will fall to the wayside. I think that no one can predict the future, but competition definitely results in a healthy market. I also think that Bitcoin’s days are numbered. Recently, the Bitcoin and Ethereum networks have been slow. Network congestion has resulted in transactions sometimes being delayed for hours. Transaction fees have been as high as $15 or $20—still way cheaper than a Western Union or international wire but not as cheap as most other cryptocurrencies. Bitcoin is still a favorite as it was the first on the scene, but once merchants and exchanges begin to adapt, I believe that Bitcoin will dominate less and less of the market. It can only be updated and improved so much without a complete overhaul of its code. Whereas four years ago, most of the “altcoins” were clones of Bitcoin with a few minor changes, nowawadays many newer cryptocurrencies have been written from scratch by teams of professional developers with years of experience in this field. We even have coins such as IOTA that don’t even use a blockchain. Developers produced a new system called the “tangle,” which is resistant to hacking from quantum computers, a common but far-fetched, in my opinion, criticism of Bitcoin.
One way to understand cryptocurrencies better is to compare them with traditional fiat currencies. Many people have criticized cryptocurrencies as “not being backed by anything” and having no intrinsic value. Well, aside from being backed by more computing power than the top 500 supercomputers in the world combined, a network of millions of users, and a secure multiple-entry accounting ledger, they are right that there is no physical asset behind, say, a Dash token or a Monero token. But, the problem is, then they go right back to using the U.S. dollar or the euro in their daily lives, as if that is somehow a better choice for their electronic transactions.
The word “fiat” is Latin for “Let it be so.” Currencies created and managed by central banks are called “fiat currencies” because they exist simply due to the government decreeing their existence. This chart shows the success periods of fiat currencies that were considered the “world reserve currency” at one point.
And the next image shows a selection of the utter failures of various fiat currencies over the past century.
These currencies are no longer backed by gold (though when they were, even as far back as the Roman Empire, the government simply thinned out the gold when it needed more money.) A central bank printing more money and lending it to big banks is an act of legalized theft. While popular Keynesian economists such as Paul Krugman will argue that a currency needs to be inflationary in order to be useful, gold and silver (both deflationary) functioned perfectly well as money for 6,000 years before governments used legal force and other shenanigans to convince their citizens to switch to pieces of paper.
Disadvantages of the U.S. Dollar and Other Fiat Currencies
The U.S. dollar is said to be backed by “the full faith and credit of the U.S. government.” Anyone who has paid attention to the U.S. national debt or the economic situation in the past few decades knows that the U.S. government does not have much faith or credit left, and neither do most of the other major governments. The entire world economy is resting on the U.S. dollar, and other major fiat currencies are in a similarly poor situation. Central banks across the world are printing money like crazy, almost as if they are in a race to see who can devalue their currency the fastest without it collapsing. Governments are using this money to fund wars, subsidies for factory farms, grants for cruel scientific research on animals and other nasty things. Every time we earn or use a dollar or a euro, we are adding value to them and supporting the folks who fund these things.
What’s worse is that every time they print a currency unit, your own savings goes down in value. They are a group of corrupt bankers stealing money from you to pay for their nefarious activities. They can do this because they control the money supply. You can certainly help fight this by using gold and silver when possible, but for electronic transfers, cryptocurrencies offer a far more ethical way to transfer value than the tokens of the central bankers and a far more convenient and safe way than trying to get 2 kilograms of gold across national borders in a timely manner.
Let’s talk about the future. Will the 1,300 cryptocurrencies become a “one world currency?” Will we become a “cashless society” by using IOTA to send an international transfer? No way. My personal vision for the future does include government currencies gradually falling by the wayside and becoming obsolete but not to be replaced with only digital systems. I think gold and silver will return to their traditional role for in-person cash transactions where people do not want to deal with digital technology. And I think a variety of cryptocurrencies (but not Bitcoin) will take over the role of government currencies in electronic transactions, domestic and international wires, microcredits and person-to-person payments. Furthermore, we can increase the use of barter systems and ledgers (such as Barter Business) to reduce the need for currency in general. Let’s face it, the world’s economic systems have a long way to go before they can be considered fair and ethical. One of the most fundamental changes we can make is in the value systems upon which our economic activity is based.
In conclusion, I’ll say this: Many of us realized that every time we bought meat, milk, leather or any other animal product, we were supporting a very cruel industry that hurts the environment and billions of sentient beings. Now it’s time to realize that any time we use the U.S. dollar or another currency that is centrally managed by corrupt politicians, we are agreeing that it has value, supporting their unethical activities and putting up with the perpetual devaluation that robs us of our savings.
But anytime we trade that euro or yuan or U.S. dollar for cryptocurrencies, gold, silver or something else of lasting value such as high-quality grafted mamey sapote trees for our tropical permaculture farm in southeast Ecuador, we are voting for a better world and adding value to the things that are much harder for governments and multinational corporations to control. Making ethical decisions doesn’t end just with what we eat. The unit of value that we use to buy that food matters, too.